I grew up in a place where handshakes mattered. Where a man’s word was his bond.

Call me old fashioned but the same principle still governs my worldview.

Doing business shouldn’t require contracts.

Except today, you’re probably making a stupid decision if you’re not getting something in writing.

Sure, contracts make things easier in some ways. Contracts define the scope of expectations for both parties. They provide a means for recourse if terms aren’t met. These legal instruments hedge against untrustworthy behaviors.

But contracts also create business friction. They introduce a third-party (lawyers) into a situation that could otherwise be settled between two competent, consenting parties. Contracts extend the sales cycle. They create a barrier to satisfying two party’s unmet needs.

Incentives matter.

People respond to incentives. Where there’s a big enough incentive, there’s also a temptation to violate an agreement. Sure, contracts provide an avenue for reconciliation in these cases – but at what cost? (Read: more lawyers).

Skin in the Game

As Robert Frost said, “Good fences make good neighbors.” In some sense, contracts are one way for a person to up the ante on someone else’s behavior. They add a little skin in the game for both parties.

Absent a contract, what’s the worst that could happen? Maybe it’s a line of thinking that ruining your reputation isn’t that high a cost. That with the right amount of money you can buy a new reputation – or better yet, buy the victim’s silence.

Kinda shady, right?

The Future

Blockchain holds a lot of cool possibilities for getting us closer to “handshake” agreements again. Not in the sense that everybody suddenly begins acting out of good faith. Rather, it takes everyone as they are. Hey, let’s just pretend everyone’s a shady motherfucker. Instead, imagine a world where people don’t have to trust one another to do business.

That’s not to say that blockchain will eliminate the need for trust. But what if it could minimize the need for trust? What if two parties could engage in transactions that didn’t require egregious legal fees, lengthy due-diligence, and an arthritic-inflicting pile of paperwork?

What if a handshake created an actual binding, digital contract? Instead of needing to “insult someone’s honor” or demand a contract – imagine if contracts generated spontaneously.

Pretty wild to think about, right? Maybe not.

Nice guys finish last.

Sadly, I don’t think honoring handshake deals is back on the rise. But the cost of transacting business AND providing means for enforcement is getting a lot easier.

I like to imagine a world where, instead of looking over your shoulder or worrying who’s going to screw you, you can confidently go about your business in good faith.

Maybe there’s still hope for the nice guys out there after all. But for everybody else, get it in writing.